After California Atty. Gen. Xavier Becerra raised objections Wednesday to the proposed sale of a closed Los Angeles hospital, Dr. Patrick Soon-Shiong said he would seek to purchase the medical campus personally rather than use a foundation controlled by him and his wife, Michele B. Chan.
Becerra said in a court filing that the proposed sale of St. Vincent Medical Center by Verity Health System, a nonprofit in bankruptcy, to the Soon-Shiong foundation is subject to review and consent by the attorney general.
Verity’s attorneys have argued that the attorney general doesn’t need to sign off on the deal, Becerra’s court filing said.
Becerra also raised the possibility of “self-dealing” if the sale goes through, because Soon-Shiong’s foundation has proposed buying the hospital while a separate Soon-Shiong-controlled company is one of the secured creditors in Verity’s bankruptcy proceedings.
Soon-Shiong, who also owns The Times, said in an interview last week that the goal is to create a “central command” center that would attract doctors and experts on the coronavirus and relieve pressure on other hospitals.
“We made a good faith bid to acquire St. Vincent Medical Center, in the hope that it would enable the state to prepare the facility for the surge in COVID-19 cases that is certain to come,” Soon-Shiong said in a statement Wednesday. “Although our tax attorneys had assured us that the foundation’s bid complied with all state and federal laws, we have informed those attorneys that I shall fund the purchase personally, instead of through the foundation, so as to avoid the baseless appearance of a conflict.”
A court hearing on the sale is scheduled for Friday.
Verity representatives did not respond to a request for comment.
Becerra’s opposition to the hospital sale marked the latest twist in the ongoing saga of St. Vincent Medical Center, in the working-class Westlake neighborhood.
In seeking a review, Becerra’s office said the Chan Soon-Shiong Family Foundation “is a party to the transaction, and Dr. Soon-Shiong and his wife, as its directors, appear to have a ‘material financial interest’ in the sale. It seems that, through their ownership of NantWorks, they may get paid up to $66 million.”
“These facts may not present a problem under bankruptcy law, but, barring some resolution, and subject to review by the Attorney General, they appear to present a problem for the foundation under California laws governing nonprofit public benefit corporations,” the filing said.
Verity’s six hospitals were originally owned and operated by the Daughters of Charity of St. Vincent de Paul. After years of financial struggles, Integrity Healthcare took over management of the hospitals in 2015. NantWorks, Soon-Shiong’s Culver City company, purchased Integrity in 2017.
NantWorks-related entities contributed more than $300 million in unsecured and secured loans and investments to the Verity hospital chain as part of Integrity’s efforts to recapitalize and revitalize the hospitals.
Verity Health filed for bankruptcy protection in 2018. The nonprofit has proposed selling St. Vincent Medical Center to the Chan Soon-Shiong Family Foundation for $135 million.
The attorney general’s office declined to comment.
Becerra has the power to review the sale of California nonprofit hospitals, but at issue is whether St. Vincent Medical Center falls under the attorney general’s purview.
Attorneys for Verity argued in emails sent last week to the attorney general’s office that were included in Becerra’s filing that the jurisdiction doesn’t apply because St. Vincent doesn’t currently operate as a medical center.
Verity’s attorneys also claimed that “Verity no longer operates or controls” the hospital, which is now being leased to the state, in an email included in Becerra’s filing.
Amid the ongoing bankruptcy proceedings, state officials moved last month to lease St. Vincent Medical Center for $2.6 million a month to treat COVID-19 patients at the site.
Soon-Shiong’s statement made clear he hopes to move forward with the project. “We hope the Attorney General appreciates that this horrific pandemic has already claimed too many lives. Every hour matters,” he said.